Dubai may sell shares in state companies to cut debt

DUBAI: Dubai may sell stakes in some of its state-owned companies to the public to reduce debt as the Persian Gulf emirate alters terms on the $24.9-billion loans at Dubai World as well as restructures Dubai Holding.

"We are working on opening up the capital of leading companies to our public," Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, told a conference in the emirate on Sunday. The sheikhdom needs to "regroup, review and reconsider some of our investments and re- challenge our competitive edge," he said.

The committee is the top decision-making body for Dubai's financial affairs. Dubai and its state-controlled companies are struggling to repay debt that Barclays Capital estimated in September at around $112 billion. The second-largest sheikhdom in the United Arab Emirates accumulated the loans during years of rapid growth in its property industry and other businesses. The International Monetary Fund estimates the debt at $109.3 billion.

The emirate roiled global markets last year when Dubai World sought to freeze payments on loans. All of Dubai World's creditors have agreed since then to a loan restructuring plan, a person with knowledge of the plans said in October.

The Investment Corporation of Dubai, one of the three main state-owned holding companies, owns stakes in unlisted companies including Emirates, the world's biggest airline by international passengers, Emirates National Oil, Dubai Aluminium and stock market operator Borse Dubai. Companies owned by Investment Corp had a market value of 73.7 billion dirhams ($20 billion) at the end of December last year, according to a government's bond prospectus issued in September.

"There might be a privatisation plan, which is something that we are working on with the government," Mohammed Ibrahim al-Shaibani, the director-general of the Dubai ruler's court, said at the conference.

The government is evaluating such a plan and may use it as a "mechanism of reducing some of our debt in the future," he said.

A share sale by Emirates "may be a reality one day, not now," al-Shaibani said. "Dubai is very rich in good quality assets and we have been chased by so many friends, bankers and investment bankers to really do something with our assets."

Dubai shares fell to the lowest in more than two months, with the DFM General Index dropping 1.4% to 1,659.5 at the close in Dubai.

"At present, there is very little confidence in UAE. exchanges leading to low volumes and sharp volatility," said Shehzad Janab, head of asset management at Dubai-based Daman Investments. "That's hardly a recipe for successful initial public offerings."

Dubai allowed foreigners to buy property in some parts of the emirate in 2002, a decision that triggered a building boom and a quadrupling of home prices until mid-2008. The credit crisis, which drove away speculators and squeezed mortgage lending, caused home prices to plunge by more than half.